According to research (Tang and Chen), nearly 60 per cent of managers will be pressured to behave unethically over the course of their careers and 50 per cent will actually do so on at least one occasion. Many people think this happens because the business world is dominated by corrupt individuals who are only really concerned with making a quick buck. This belief is supported by business ethicists, who have been studying immoral behaviour for just a few decades. Generally speaking, this camp argues that unethical behaviour is caused by greed, deviant personalities, weak moral development and self-serving decision-making. But if truth be told, the average businessperson is actually relatively ethically minded. In fact, as the research noted above indicates, only about a third of unethical corporate behaviour is driven by a desire for personal gain or promotion. The larger problem is that good people can be coerced into doing things that are contrary to their beliefs.

In this article, I debunk the myths of unethical behaviour created by business ethicists. Then I use the work of criminologists, who have been studying immoral behaviours for generations, and researchers in social psychology, where Sigmund Freud’s work on decision-making has been around for over a century, to argue that unethical corporate behaviour is most often a result of situational and contextual factors, job dependence and cognitive factors, which is perhaps an even more disturbing conclusion than the popular view of managers as greedy, manipulative and deceptive. After all, while cognitive factors are used to justify unethical behaviour, situational factors and job dependence lead to a cycle of unethical behaviour in which managers are locked in, and which leads to the perpetuation of corporate malfeasance.

MYTH 1: The conclusion of business ethicists that managers and executives are predominately driven by the love of money has been popularized by the media, not to mention movies such as “Wall Street” and “The Wolf of Wall Street.” However, researchers in the human resource field have consistently shown that people with greed-driven personalities like Gordon Gekko and Jordan Belfort are actually the exception in the business world, not the rule.

Indeed, as polls conducted after the Global Financial Crisis indicate, recognition for leadership, career satisfaction and job security are as important to your average businessperson as compensation. Managers donate to charities. They volunteer. And they care about the environment. Simply put, there is no evidence to suggest that the average businessperson sees ethical issues any differently than the average person.

MYTH 2: Deviant personalities are often blamed for unethical behaviour. Ever since the publication of Machiavelli’s famed opus The Prince, his name has been synonymous with manipulative and self-serving individuals lacking empathy.

Machiavellians typically behave unethically by attempting to “game” the system and creatively comply with rules, typically with the assistance of lawyers who are skilled at finding loopholes that undermine the law. By doing this, Machiavellian managers seek immunity from consequences associated with their actions.

There is no question that this occurs in business. It happened at Enron (with mark-to-market transactions, special purpose vehicles and offshore accounts) and with the sale of risky mortgage assets that were disguised as highly rated securities until the subprime lending crisis reared its ugly head.

However, as behavioural research (Hunt and Chonko) found, individuals with Machiavellian personality types are not predisposed to careers in management. In fact, the average manager has been found to be no more Machiavellian than the average person.

MYTH 3: There are six stages in Lawrence Kohlberg’s cognitive moral development theory, which argues that individuals advance in moral development as they age. They are: (1) avoiding punishment, (2) self-interest orientation, (3) conformity to social norms, (4) law and order, (5) social contract orientation and (6) universal ethical principles.

It has been suggested that most managers operate in the law-and-order stage, in which individuals believe that any act that does not conflict with any legislation is morally acceptable. Many international business executives have followed this philosophy. For example, ChevronTexaco was accused of dumping over four million gallons of toxic waste in rivers throughout the Amazon rainforests of Ecuador. Over 350 uncovered waste pits were littered across the lands of indigenous populations, which displaced thousands. But when asked about their actions, executives claimed that no specific legislation prohibited their behaviour at the time.

Theorists such as James Rest believe that when individuals reach the higher levels of moral development, they are more likely to behave ethically. However, it has been shown that this does not necessarily translate into ethical behaviour because when these individuals encounter the wrong situation, they can still behave in ways contrary to their beliefs. In other words, regardless of their level of moral development, individuals will behave in ways that address their immediate concerns.

MYTH 4: A common misconception is that all unethical behaviours are self-serving. Examples of this include deceiving customers to make a sale and lying on expense reports. But although some unethical behaviour is clearly self-serving, most unethical acts in the workplace are actually the result of managers encountering a moral dilemma.

A manager might hire based on nepotism, not merit, or might decide to turn a blind eye when employees cut corners on quality or steal office supplies. Each of these examples is encountered frequently and they are not necessarily self-serving.

The above myths created by business ethicists conflict with the findings of criminologists and social psychologists. Unethical behaviour according to the latter camp is most often a result of situational or contextual factors, job dependence and cognitive biases (see Exhibit 1).

Exhibit 1: Unethical Behaviour (Ethicists versus Criminologists and Social Psychologists)

Business Ethicists	Criminologists and Social Psychologists
1. Greed (love of money)	1. Situational or contextual
2. Deviant personalities	2. Job dependence
3. Cognitive moral development	3. Cognitive biases (rationalization)
4. Unethical behaviours are self-serving

When operating in the hypercompetitive global marketplace, managers perpetually encounter pressure to meet the evolving needs of customers, shareholders and other stakeholders. As a result, they can act unethically out of desperation, especially when encountering moral dilemmas that challenge their job security. When this happens, they become most concerned with making ends meet and providing for their family. Indeed, when managers perceive that they could lose their job if they don’t perform, they are more inclined to behave unethically.

Pressure on managers to meet workplace objectives is amplified when they are unable in the short and medium term to find other employment. Job dependence can be caused by a lack of experience, skills or education. But a major factor is the lack of financial autonomy, which is a growing social problem around the world due to mounting personal debt. In other words, since managers are under increasing pressure to perform while also becoming increasingly dependent on their jobs, a significant motivator of unethical behaviour is on the rise.

Nobel Laureate Herbert Simon and others have argued that individuals have computational limitations that prevent them from processing all the information available when faced with making decisions. At times, we are unable to decipher the relevant from the irrelevant. This makes rational choices elusive and leads managers to make expedient decisions at the expense of accuracy. In short, we have “bounded rationality” and so to satisfy our immediate concerns, we can make unethical choices. And when individuals make unethical choices, they distort their perceptions through rationalizations.

Popular rationalizations include denial of responsibility (“I had no choice”), denial of injury (“no one was hurt”), denial of victim (“they deserved it”) and appeals to higher loyalties (“I did it for my family”). Sigmund Freud contended that rationalizations are largely used to minimize guilt. Put differently, rationalizations help managers believe that unethical behaviour is morally acceptable.

But rationalizations cannot completely remove guilt. And since managers are, for the most part, good people, they often experience negative feelings, such as depression, when they behave unethically. When this happens, consumer psychology research tells us that emotional consumption is a common response. However, repressing negative feelings through the consumption of goods and services takes money. Therefore, emotional consumption can drive managers deeper into debt and increase job dependence.

Combine the motivating factors of unethical behaviour identified by criminologists and social psychologists and a disturbing cycle becomes clear. When employees face a moral dilemma that threatens their job, they are more inclined to behave unethically. If they do behave unethically, two things happen. First, they distort their perceptions and rationalize their unethical behaviour by arguing that what they did was morally acceptable. Secondly, they emotionally consume in order to address the negative feelings associated with their unethical behaviour. When managers encounter escalating debt and increase their levels of emotional consumption, they become highly dependent on their employers to pay their bills, make ends meet and, generally, fund their debt-fuelled consumption. This organizational dependence will cause managers to experience additional stress and pressure to perform, which ultimately perpetuates unethical behaviour.

This article was written with two main objectives in mind. The first simply involves raising awareness of the real motivating factors behind most unethical corporate behaviour to help anyone locked into the destructive cycle mentioned above. After all, the first step to breaking the cycle is awareness. The second objective is to offer organizations practical advice on how to limit unethical behaviour over the long term.

The following are strategies that managers can implement to keep themselves and their colleagues away from dangerous situations and, by extension, the cycle of unethical behaviour:

1. Human resource managers should focus on providing employees with career counselling and focus them on continually increasing their knowledge, skills and education to avoid becoming too dependent on their employers. With the advent of online educational opportunities, there are now more paths that managers can follow to increase their knowledge. To increase one’s experience, there are many volunteer opportunities for skilled managers to govern charities and non-government organizations (NGOs). Most charities and NGOs are constantly seeking volunteers to sit on boards of directors and this poses an excellent opportunity for managers to gain governance experience whilst networking.
2. Managers should try to live within their financial means and not over-extend themselves too much. To assist their Harvard MBA students prior to entering their careers in management, Badaracco and Webb gave excellent advice on how to avoid getting into the wrong situations. They told them to “get a ‘go to hell account.’ Get three to six months’ pay in the bank. Be prepared to tell someone to ‘go to hell,’ and then walk.”
3. Organizations should have an independent ombudsman that can assist managers when they encounter moral dilemmas. Through this, managers will be able to discuss their issues with a trained professional and also address the subsequent negative feelings that can occur from difficult decisions. This could potentially counter many of the rationalizations and ensuing emotional consumption that can arise.
4. Managers need to acknowledge that employees rationalize their unethical behaviour and, in order to address this, managers should implement ethical training programs. Through these, employees can be made aware of the rationalizations that are used and how managers emotionally consume when they behave unethically. Managers can focus on how the latter can have a negative impact on managers’ finances.
5. Leadership plays an important part in ensuring accountability throughout the organization. Leaders act as role models and have the power to instill an organizational culture that values and thrives on ethical behaviour. Through ethical leadership, moral behaviour becomes embedded in the values, climate and norms of an organization.

The outcomes associated with workers behaving badly are often relatively benign, ranging from lost office supplies and inflated expense reports to minor customer deceptions and white-lie tax filing. Collectively, however, the cost of these so-called benign acts is enormous. Employee theft alone, for example, costs companies hundreds of billions of dollars annually. And then there are the astronomical costs of extreme unethical behaviours such as the financial tomfoolery that created the recent subprime lending crisis, which resulted in an estimated US$1 trillion in losses. And that doesn’t include the costs of associated government bailouts, not to mention the social and economic impact of the lost jobs and lost homes.

Clearly, unethical corporate behaviour is a serious problem that needs addressing. But to do that, the business world needs a better understanding of what makes managers misbehave. Hopefully, by deploying the strategies outlined above, organizations can break the cycle of unethical behaviour and address the decision-making weaknesses of managers.